What’s Your Distribution Rate When It Really Matters?


Let’s face it. Many of us have short attention spans. Whether it’s looking at our phones or tablets, quickly changing conversations with multiple people, or simply not being able to focus on a task, technology and social pressures have changed the way we interact with people and weakened our ability to pay attention for long periods of time. 

I feel we tend to keep a shorter vision on retirement planning as well. And, this could be dangerous for our clients.  

We talk a lot about life expectancies increasing and determining the proper payout for a client’s assets. Unfortunately, I see many people making plans based upon life expectancies of newborns. We need to concentrate and look at the expanding life expectancies of 65-year-olds and the complications that those extra years bring. 

Rising income needs due to inflationary pressures are greatest in retirement because of health care and housing issues. Longer retirements cannot withstand level income for long periods of time, especially with a volatile base of assets. As planners, we need to consider the impacts of our clients’  income sources in 20 years, not just in that initial five- to 10-year period. 

Over the years, the 4 percent distribution rule has been kicked around by many industry professionals and academics. Again, I don’t think the distribution percentage at age 65 is as important as what the percentage will be in 15 years. Too often, we set a withdrawal rate based upon today’s factors. And, we don’t mitigate the other risks in retirement. Eventually, due to inflation primarily, the withdrawals must invade principal. This starts a downward spiral of asset depletion, resulting in the client running out of money. 

We have to challenge our thinking about income distribution and asset accumulation so that both counterbalance one another. Today, we use one to fund the other. But, they need to complement each other throughout a client’s lifetime.  

If you’re using a simple withdrawal strategy for income, chances are the withdrawal rate will escalate in the client’s late 70s and 80s. This adds pressure to the remaining portfolio and might eliminate options. Instead, think about designing a guaranteed, inflation-adjusted floor of income and creating liquidity with funds that don't supply income. At the same, complement the plan with risk mitigation products to increase the probability for success.  

Bottom Line: You’ve heard the saying “It’s not what you earn; it’s what you keep that matters.” Well, it’s not the distribution rate when you start that matters; it’s the rate in the second half of retirement that makes retirement sustainable.  

Mike McGlothlin is the Executive Vice President of Annuities at Ash Brokerage. His strength is helping advisors become more efficient and effective in their businesses. He and his team provide income-planning solutions focused on longevity and tax efficiency, and they also assist advisors with entering defined-benefit termination planning and structured settlement markets. 

Make a Game Plan to Remove Risks


As a former student basketball manager at Indiana University, I remember listening to Coach Knight talking to his assistants about strategy. Typically, the game plan revolved around taking away a strength for the opposing team – or taking away a risk to our team. Reducing a significant risk greatly increased our chances of winning. 

Why don’t we do the same with our clients?

Maybe we don’t know the risks for each client. After all, there are so many risks associated with retirement planning. In order to best serve our clients, we look holistically at tax consequences, cash flow, charitable and gifting strategies, survivor’s income protection techniques, and maximizing Social Security. Risk mitigation strategies like long-term care and life insurance are usually discussed, but not necessarily as urgently as they should. To a lesser extent, we address inflation, housing and health care concerns for retirees.  

All those risk are important; however, there is one risk that multiples all the above risks: longevity. If your clients run out of money, several things can happen at once: 

  • Cash flow becomes strained due to a reliance on government provided programs
  • Maintaining income to a survivor becomes nearly impossible with few alternatives, as past Social Security decisions can’t be changed
  • Long-term care (at the level of care the client deserves) becomes burdensome and creates emotional conflict due to the financial stress

One way to alleviate the exponential impact of any of these risks is to address longevity up front. Planning for a guaranteed, inflation-adjusted floor of income should be the cornerstone of any retirement planning strategy. Additionally, the risk of longevity can only be shifted to insurance products that provide income that you can’t outlive.

Regardless of net worth or total assets, your clients should never self-insure their longevity. Because the risk of longevity isn’t a singular impact. It’s a risk that impacts their entire net worth. 

Bottom Line: Make a game plan for eliminating your clients’ biggest risk by addressing longevity first.  Start their retirement income strategy with guaranteed, inflation-adjusted income with a life contingency. By taking longevity off the table, you increases your clients’ probability of success in retirement.


Mike McGlothlin is the Executive Vice President of Annuities at Ash Brokerage. His strength is helping advisors become more efficient and effective in their businesses. He and his team provide income-planning solutions focused on longevity and tax efficiency, and they also assist advisors with entering defined-benefit termination planning and structured settlement markets. 

The Good News of Market Downturns


Many people look at market corrections in largely a negative way. Of course, we can always talk to clients about buying low and selling high as a reason to invest or reinvest when a correction occurs. Just like making lemonade out of lemons, advisors should evaluate all angles of a client’s situation and look for ways to improve it in an ever-changing world. 

Following the August 2015 market drop, a potentially good subject to bring up at your fourth quarter client meetings is the re-characterization of Roth IRAs. Oct. 15 was the cutoff to change a Roth IRA back to a Traditional IRA for the previous year. However, if your client took advantage of converting a Traditional IRA to a Roth prior to the market dip in 2015, there are reasons to look at re-characterizing the asset back to a Traditional IRA and then re-convert.  

Because the client converted prior to the correction, that client will pay tax on the larger amount converted. Re-characterizing the asset allows them to eliminate the tax consequences at the higher asset value. The asset must stay a Traditional IRA for 30 days; then, the funds can be re-converted to a Roth IRA at the lower market value. Assuming the market stays lower than the original conversion date earlier this year, the client can convert the same amount of shares at a lower value and less tax. Then, any future gains (even those below the original conversion amount) grow tax-deferred and are accessed tax-free for qualified withdrawals.  

Of course, the client only benefits from this transaction if the account value stays below the originally converted amount prior to the re-conversion. This is a market risk you and a client must discuss. However, this tactic allows them to potentially convert more under the same tax bracket than prior to the market correction.  

Looking at ways to efficiently convert funds from a taxable consequence during retirement to a tax-free status positions the client for potentially more disposable income later in life, and it gives them a higher probability of not running out of money. That’s truly looking out for your client’s best interest. When you have that conversation, my guess is your client will appreciate your knowledge and attention to detail in handling their account.  

Bottom Line: Look toward the tax code for opportunities to open up conversations with your client and help position more tax-free income for them later in life.  


Mike McGlothlin is the Executive Vice President of Annuities at Ash Brokerage. His strength is helping advisors become more efficient and effective in their businesses. He and his team provide income-planning solutions focused on longevity and tax efficiency, and they also assist advisors with entering defined-benefit termination planning and structured settlement markets. 

Be Ready for Change


Change. Wow, some things sure have changed in the insurance business, while others remain the same. (More on the latter in a bit.)

At the risk of showing my age, I remember selling life insurance out of a rate book. Paper illustrations were next, and now we can display values on an iPad or other mobile device. The same goes with mutual fund sales – they used to include a paper prospectus. Now, a CD delivers the same information.

I just attended our national sales meeting and change was a continuous topic. The message was loud and clear: Be prepared and able to change because change is constant.

The market is always introducing new products, and new strategies to use them. Government regulations and carrier changes can make our jobs more complex, but they can also make things more interesting. 

Don’t forget our clients’ needs are always evolving, too. Retirement planning isn’t what it used to be, and the economy can change without notice. We have to be on our toes if we want to be effective. 

That brings me back to the latter … There are some constants in our business, such as protection and reliability. Clients will always need solutions to give them those things … and they’ll always need professionals like us to deliver them!


Put It In Practice

Be ready for change, but hold on to your beliefs for the solutions we provide. The core of our business will never change. 


The Parable of the Reserve Tank


Recently, I heard retirement specialist heavyweight Tom Hegna share at story with some very powerful truths that are relevant to every financial advisor. These life-changing principles are vital to prevent seniors from running out of money in retirement. The original story is from Dick Austin – he contributed to Tom’s book, “Retirement Income Masters: Secrets of the Pros.”

To summarize, some friends from the Northeast had always wanted to visit the desert. So they flew to Death Valley, rented a car and headed across the desert. The trip was wonderful – everyone was having a great time! But suddenly, they noticed a road sign that read, “Next Gas Station 100 miles” … and their gas gauge was rapidly approaching “E.” Their joy quickly turned to anguish, and they worried about what they should do. 

Dick wrote that running out of money in retirement is just like running out of fuel. Everyone thinks it’s about the day you run out. But it’s really about the years prior to that unfortunate event. 

It can be said, “You know you’re going to run out, but you just don’t know when.”

Just as the friends stared at the glaring red “E,” many people in retirement are just staring at their own “gas gauge”— their brokerage or savings account balance— waiting for it to run out. Unfortunately, life for many brings about the loss of peace of mind in retirement and the inability to enjoy the “scenery” along the way.

The Unexpected Discovery – The Journey continues

So what came of the friends in the desert? I like to think they discovered their rental car’s reserve tank – they just had to flip a switch in the glove compartment. Once they activated it, the gas gauge showed that the car could safely reach the next gas station. What a huge relief! All the passengers took a deep fresh breath of air. Their trip was once again enjoyable.

The Real Discovery

But that’s not the best part! As the travelers continued to read more about this reserve tank, its technology and its scientific ingenuity, they discovered their last-minute ploy was actually the least efficient way to use the tank. It had really been designed to enhance and optimize the journey, and using it only as a last resort was the worst way.

Here’s what they found out:

  • The main gas tank would take the vehicle about 500 miles
  • Turning on the reserve gas tank after the main tank was about to run out only added about 25 miles 
  • To their surprise, if they had used the reserve tank FIRST and THEN switched to the main tank, the vehicle would have gone about 680 miles
  • If they had switched back and forth between the two tanks, depending on outside conditions, they could have gotten 700 miles

Unbelievable, right?! Counterintuitive and almost illogical, but it’s true. No, not the part about an SUV going through the desert (that part is made up), but the principles are real.


The Biggest Surprise Yet!

Reverse mortgages are the reserve tank for most retirees.

I know what you’re thinking: “You’ve got to be kidding me!” No, I am not.  

For most of their history, reverse mortgages have been rather unpopular with financial planners, due both to their relatively high costs, and the fact that they are typically viewed as a resource or tool of last resort. Yet the reality is use of reverse mortgages has exploded over the past decade due to newer, lower cost options. Several recent research articles in the Journal of Financial Planning have illustrated methods showing how reverse mortgages can be used proactively to enhance retirement income sustainability. 


No More Loan of Last Resort

Where did this language of “last resort” come from?  

The earliest written source actually came from a FINRA investor alert that quoted “Reverse mortgages should only be used as a last resort.” Is that true? The answer has always been no, but it wasn’t until Dr. Barry Sacks, a PhD, MIT trained physicist, Harvard Law graduate and ERISA-focused law practitioner, and his brother, Dr. Stephen Sacks, took that presupposition to task that we actually had the metrics to prove it.

I won’t get into all the details right now, but you can find the full article and videos HERE with links to the published work, “Reversing the Conventional Wisdom: Using Home Equity to Supplement Retirement Income” 

The research was profound, but the summary was really quite simple: Using a reverse mortgage as a last resort is the least effective way to use it. Dr. Sacks further stated that using the reverse mortgage as a first option gives retirees significantly better outcomes than expected.   

The research was so compelling, Dr. Sacks was asked to share it with FINRA – in October 2013, FINRA changed their positon on reverse mortgages by eliminating the “last resort” language. That’s right, they’re no longer a product of last resort!  

The facts are out and the results are in. The reverse mortgage is truly the reserve tank in retirement income planning. Any advisor who is still suggesting that they only be used as a last resort has missed both the updated research and the power of putting one in place earlier in retirement versus later.  

Now more than ever, advisors need to learn every legitimate strategy available to preserve and protect their clients’ retirement while keeping their own practice relevant and expanding. 


How Can an Advisor Learn More?

Reverse mortgages may not always be the right conclusion, but they should certainly be a part of any serious retirement conversation. The journey of a lifetime necessitates a well-planned and investigated strategy for the future. Find out how the best years are yet to come for your clients through the proper, planned use of the reverse mortgage. Learn more at: or   


HECM Reverse Mortgages Don Graves